Question for the Money Doctors

Question

possible to move after tax contributions
from conventional IRA to Roth IRA thereby
leaving only taxable funds in conventional
IRA for 701/2 RMD.
If OK what IRS forms.
or would this be "cherry picking"

Answer

Unfortunately, the rules don''t allow you to "cherry pick" the after tax contributions in your traditional IRA for conversion to a Roth. A Roth conversion needs to be reported on Form 8606 and this form has the effect of forcing you to determine the taxable portion of your conversion by using a ratio which is based on the after-tax portion of all of your IRAs to the total value of all of your IRAs. In other words, you can't get around this rule by isolating all of your after-tax contributions into one IRA and just making a Roth conversion from that account. For example, if the total of all of your IRAs is $50,000 and this includes $10,000 of after-tax contributions, 80% (($50,000-$10,000)/$50,000) of any portion of any IRA which you convert to a Roth would be taxable. If you're still working and your employer has a 401(k) plan which accepts rollover contributions, you might be able to transfer the pre-tax amounts in your traditional IRA leaving only the after-tax amount in your IRA. Then you would be able to convert the after-tax amount to a Roth and avoid having to pay income tax in the process.